Is Canada Back?

Canada is somewhat back: The marginalization of federal foreign policy

By Steve Zhang

Three years ago, during his successful election campaign, Justin Trudeau and his Liberals promised Canada would revisit its commitments to multilateralism and the international order established after the Second World War.

Despite the ambitious rhetoric, Canada is hardly ‘back,’ experts say.

While the Liberals have had some moderate successes re-engaging with old allies and on some key issues – principally the re-negotiated North American trade agreement – Canada’s foreign policy has largely fallen short of its goals.

However, the Liberals cannot be blamed, at least not wholly, for the lack of concrete results in Canadian foreign policy. Nearly a decade of Conservative rule, and Donald Trump’s unexpected 2016 election victory have combined to push foreign affairs to the periphery of the national agenda.

As Daryl Copeland writes in “Canada’s back” – can the Trudeau government resuscitate Canadian diplomacy? in the Canadian Foreign Policy Journal, Canada was at one time an ‘honest fixer, peaceful broker and pioneering peacekeeper.’

That changed when Stephen Harper’s Conservatives formed government in 2006.

“They basically repudiated pretty much all of the foundations of post-Second World War Canadian foreign policy, (with) the distancing from multilateralism, the infusion of ideology rather than pragmatism,” says Copeland, a former diplomat and fellow with the Canadian Global Affairs Institute (CGAI).

According to Copeland, one of the biggest things that plagued foreign policy during the Harper administration was a succession of seven foreign ministers who were largely indifferent, and sometimes antagonistic, to the international order.

“Canada went from being known as an engaged, active and helpful kind of presence on the international stage to one which was largely spectral,” Copeland said. “Instead of a country that one would want to have at the table during important international negotiations, we became somewhat of a pariah.”

On certain issues, the Liberals have maintained Conservative policies. Hélène Laverdière, the out-going NDP foreign affairs critic, points out that the Conservatives dropped several African countries from its foreign aid program and the Liberals have yet to restore that aid.

Overall Canadian foreign development aid has fallen to historic lows at 0.26 per cent of gross national income (GNI), and is lower than both the national target of 0.7 per cent, and 0.31 per cent under Harper. Laverdière also asks how a party that claims to champion human rights can continue to support the $15-billion arms deal with Saudi Arabia, signed in 2014 by the previous administration, given the kingdom’s poor record on human rights.

“There’s a lot of talk that’s different from the Conservatives, but in their actions, we don’t find it,” she said. “They need to show more leadership on a range of issues that are traditional for Canada, including peacekeeping.”

In the past, Canada was a leading peacekeeping nation. As much as 10 per cent of the peacekeepers – roughly 80,000 personnel – sent on UN missions between 1948 and 1988 were Canadian, and Canada, under Prime Minister Lester B. Pearson, is credited with helping create the template for modern peacekeeping.

“It was a key way that Canada was supporting the United Nations. That lesser support for peacekeeping did not start with Harper,” says Peggy Mason, a former Canadian Ambassador for Disarmament to the UN, and president of the policy think-tank, the Rideau Institute, “but under Harper, Canada was absolutely hostile to UN peacekeeping.”

Mason says the decline in peacekeeping started when Canada became more involved in NATO-led operations, such as in Yugoslavia, under Jean Chrétien.

Trudeau pledged to resume Canada’s peacekeeping role and bolster its contributions to peacekeeping missions. The original promise was to provide 650 troops, but the actual contribution has been far lower: 250 troops and six helicopters were sent to a UN mission in Mali. It was a contribution that took two years to materialize, and contrasts heavily with contributions of between 1,000 to 4,000 troops deployed from 1990 to 1995, according to figures from Providing for Peacekeepers.

On another major foreign policy issue, climate change, the Trudeau goverment has removed Harper’s restrictions on government scientists allowing them to speak openly about their research. The Liberal government has also signed the Paris Accord on combatting climate change. Harper muzzled scientists with a special media centre to control what information became public, and it was also under his administration that greenhouse gas emissions reached an all-time high in 2007.

Another area where there’s been success is the Canada-US trade portfolio, dominated by the trade renegotiations. At the centre is Minister of Foreign Affairs Chrystia Freeland who is Canada’s lead negotiator with the United States, a daunting prospect given the unanticipated election of Donald Trump as president, who made cutting a new trade deal a priority.

“It’s been very difficult for the government because the attitudes of the Trump administration towards global trade has meant that Canada has really been fighting a defensive battle,” says University of British Columbia political science professor Allen Sens. “Canada has been put in a position of being very reactive, so it hasn’t had the capacity to be proactive in those few areas where it could have been, like the United Nations.”

According to the 2018 Trudeau Report Card by Carleton University, Freeland has aligned herself closely with American interests. As the United States continues to look inward, Canada is destined to be dragged along. The two countries’ fortunes are tied so closely together that trade negotiations has taken attention away from other parts of Freeland’s job. Others have argued that this focus on trade actually represents the government’s commitment to foreign policy.

“This whole negotiation has raised her profile so considerably,” says Norman Hillmer, Chancellor’s Professor of history and international affairs at Carleton University. “There are two kinds of leaders: there are the micromanagers like Harper who wanted to do it all themselves, and then there are those who will delegate and it’s clear that Trudeau has enormous confidence in Chrystia Freeland.”

Hillmer says the trade renegotiations have demonstrated Canada’s ‘internationalist credentials in a very credible way.’ Freeland, he says, is a capable minister who shows Global Affairs Canada has a life of its own, without having to toe the party line, as it did under Harper.

Since 75 per cent of Canada’s exports go to the United States and 40 per cent of its GDP relies on those exports, as former diplomat and vice president of the CGAI Colin Robertson says, it makes sense that all of Freeland’s energy was devoted to one file.

“She knew she had to deliver, so she put her energy not necessarily where she would’ve liked to put it,” says Robertson, “but she knew that was the priority, and that’s ultimately what we expect governments to do: deal with what’s vital.”

For her efforts, Freeland has been named Foreign Policy’s Diplomat of the Year for 2018, and is being lauded for how she handled the trade file. Although Canada, along with Mexico, had to make some concessions in the United States–Mexico–Canada Agreement, it was able to retain access to US markets, and the U.S. dropped some initial demands, such as asking for 50 per cent of all car imports to be American-made. However, trade is one part of a larger foreign policy file, and all parts must be engaged for foreign affairs to succeed.

“I think we need to put more into pure diplomacy because that matters more than ever, especially with the U.S. taking a vacation under Donald Trump from minding the world order,” says Robertson. “We were the engineers [of the world order] and we’re going to have to step up.”

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NAFTA and Dairy

Eureka! At last, we have a renegotiated NAFTA

Free Market Reflections with Steve Dittmer

While it seems like forever to us, these kinds of diplomatic trade battles usually take several years to settle, not just a little over a year. Of course, President Trump wasn’t around before now, pushing people’s buttons and impatiently demanding results like a business tycoon.

Prime Minister Justin Trudeau made a major point that the agreement meant economic stability and certainty for Canadian businesses and investors. Foreign Minister Chrystia Freeland had held her ground all along, reminding folks she was after a good deal for Canada.

And she got her most important priority — keeping the dispute resolution procedures in place — and next, getting what is effectively an exemption on any upcoming 25 per cent auto tariffs, getting 2.6 million units duty free, compared to the 1.6 million currently exported.

From a distance, it is hard to say how much damage the dairy sector will have to absorb. I know some folks will say 3.59 per cent is not a big deal but when an industry is fundamentally oversupplied, even a couple per cent is significant. We learned that lesson years ago in the beef industry. The market is much more sensitive when the supply is close to the edge than when demand is out ahead of supply. Apparently, the supply management and subsidies were left intact, so the government will have an easier time figuring out how to compensate producers for their losses.

That supply management and subsidy “problem” is left to another day, likely another government. Your beef industry is much closer to a free market system and so the government control and subsidy for dairymen is a bit foreign to cattlemen. But I ran across an opinion piece from a Canadian before the final agreement that some livestock folks may think still applies.

Colin Robertson, vice-president of the Canadian Global Affairs Institute, noted Trudeau’s political problem in executing a dairy deal right before a Quebec election October 1. (Of course, other issues had already determined that election outcome, it’s just no one knew that for sure before October 1.) Robertson told Politico that there were some cracks in the Quebec supply management defense. Some favour the end of supply management and he concurs with the opinion that “Canadian cheese can be world busters” and Canadian dairymen can be competitive with the Aussies and Kiwis. He thinks the adjustment assistance necessary during a transition is “affordable” and that dairy can be just as successful as Canadian “beef, pork, grains and lentils.”

“Mr. Trump may force us to do what we should do,” Robertson concluded.

Now, Canadians will have to decide what, if anything, they want to do and find a new bad guy to force it.

I think your Minister Freeland did a very good job, holding her dispute resolution position, beating back the sunset clause with a pretty clever device and protecting Canada from a 25 per cent auto tariff. Given her toughness and the backing she has apparently gotten from Trudeau, I would guess she will get a good deal on the steel and aluminum tariffs very soon, probably a quota with some headroom.

After all, it is not easy negotiating with the trading partner you sell 75 per cent of your exports to. Especially when that partner realizes its advantage, pushes it and has a booming economy and substantial hubris behind its approach.

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One thing I have learned from my conversations with Canadian friends and trips to your meetings: the fundamental attitude is totally different in an exporting nation versus one dominated by its domestic market. It has been your advantage to have producers who instinctively cut right to the customer’s thinking when structuring their whole industry, versus the American cattlemen’s attitude for many past years that we’ll produce what we want to produce and the domestic market will always be there.

It has also been pointed out that the strengthening of the auto manufacturing model, to require 75 per cent of the content to be made in North America to be duty free and that 40 per cent of it be made by workers making at least $16/hour, helps Canada as well, as some of its auto and parts manufacturing has been lost to Mexico over the years.

Canadians feel President Trump has been too hard on Canada during these negotiations and I can’t blame them. But, when you are trying to tackle the brute running back (China), some other guys are going to get bumped along the way. But deep down, businessmen in both countries are aware of how integrated our businesses and economies are. That kind of pressure undoubtedly played a part in getting this thing done, especially with our mid-term elections so soon.

Oh, I see Canada has been busy with the process of ratifying the TPP agreement— you know, the one without the U.S. in it. Go figure.

Oh, Canada!

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USMCA Improvements

USMCA expected to improve investor confidence in Canada

  • Corwyn Friesen, mySteinbach
  • Posted on 10/05/2018 at 9:05 am

The Vice-President of the Canadian Global Affairs Institute is confident a new trilateral North American trade agreement will help bolster investor confidence in Canada.

Canada, the United States and Mexico have successfully concluded negotiations aimed at creating a United States-Mexico-Canada Agreement on trade.

Colin Robertson, the Vice-President and a fellow of the Canadian Global Affairs Institute, says from Canada and Mexico’s perspective it ensures preferred access to the largest market in the world and, for the United States, it illustrates to the world that, even with Donald Trump as President, they actually can do trade deals.

From a Canadian and Mexican perspective, it lifts the uncertainty about investment in Canada both by Canadians and by foreigners who look at Canada as an attractive destination. We’ve got a highly educated work force, we have energy, we’ve got capacity but if we don’t have access to the biggest market in the world they begin to think, why do we not we situate in the United States instead of in Canada.

But I think now that Canada has maintained and preserved its access to the United States as well as now having better access to the Pacific because of our membership in the Comprehensive and Progressive Trans-Pacific Partnership and to Europe through the Comprehensive Economic Trade Agreement that puts Canada in, I think, a quite enviable position.

Importantly for North America it once again means that North America can operate as a kind of platform, particularly in manufacturing. And we’ve made improvements. There are chapters now on the environment and labour and that introduces a kind of progressive element. And we’ve added a chapter on digital commerce, something that was in both the European and the Pacific agreements but was missing from the former NAFTA.

~ Colin Robertson, Canadian Global Affairs Institute

Robertson notes the USMCA will run for a minimum of six years and it can be renewed twice so it can go to 18 years with revisions as we go along which provides and added measure of stability.

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USMCA not done yet

A proposed deal – not NAFTA 2.0 but, in deference to U.S. President Donald Trump who initiated this 13-month odyssey, the United States-Mexico-Canada Agreement.

Judging by the market reaction, the USMCA should be good enough to thaw the chill shared by investors, both Canadian and foreign, since the negotiations began. We are not out of the woods – congressional approval of the necessary implementation legislation is no slam dunk and there is still the threat of further Trumpian protectionism, whether direct or through collateral damage.

The dairy lobby is aggrieved but they dodged a bullet. Supply management, a protectionist system badly in need of reform, is preserved. We gave the Americans about half-a-percentage more of the market than they would have received had Mr. Trump not pulled out of the Obama-initiated Trans-Pacific Partnership.

Even with the additional quota negotiated for the EU in the Canada-EU trade pact (CETA), more than 90 per cent of our dairy market is still protected for Canadian producers. It is also a sure bet that the federal and provincial governments will open their wallets to provide adjustment assistance to the afflicted, although for taxpayers’ sake there must be demonstrable proof of injury. There is no reason why our dairy farmers cannot become as successful internationally as our beef and pork, grains and pulse producers, especially given the growing appetite for protein in the Indo-Pacific.

The dairy lobby’s cry of pain is reminiscent of that heard from vintners after the Canada-U.S. free-trade agreement (FTA) of 1988 opened up their market. Today their products are both very drinkable and sell more than ever before. The tentative new agreement means that U.S. wines will now share shelf space on British Columbians’ shelves with B.C. wines, but B.C. protectionism is the kind of non-tariff barrier that we rail against in other markets. Redress was overdue and it reminds us that, when it comes to protectionism, no nation has clean hands.

Canadian auto manufacturers have cause for celebration. It appears we have evaded Mr. Trump’s threatened 25-per-cent tariff and, even if trade is slightly more managed, the new rules of origin and the wage component could well create more opportunities, especially for Canada’s highly competitive parts manufacturers – our real niche in the global auto trade.

There is the potential for slight cost increases in pharmaceuticals with the extension of patent protection but provincial administrators are now very skilled at using their cartel power to get the best price from drug manufacturers. E-commerce shoppers can celebrate because purchases under $150 will now pass much more freely and our customs inspectors can focus on bigger game, including keeping counterfeits out of North America.

Our negotiators deserve a glass of sparkling wine (Canadian) but the USMCA is far from being a done deal. While majority governments in Canada and Mexico will be able to secure legislative implementation, passage in the next U.S. Congress is no sure thing.

We need to continue the advocacy campaign into the regions and within the Washington beltwayMost Americans still have no idea that their main export market is Canada and that jobs and prosperity depend on mutually beneficial trade and commerce. More than 300 Team Canada outreach missions made contact with more than 300 members of Congress, 60 governors or lieutenants-governor and most of the Trump cabinet. To protect Canadian interests this must become a permanent campaign.

 The premiers and provincial legislators must continue to play a critical role in reaching out to their counterparts and this should be a main discussion topic at the upcoming first-ministers meeting on trade. We need to increase our presence in the U.S. – a representative in every state should be our goal. Here again, the premiers can help through establishing offices in the states that matter most to them. Ontario is the province most dependent on the U.S. market. Instead of seeking federal handouts, Premier Doug Ford could learn from Quebec. La belle province has long had representatives in U.S. states. These representatives complement the work of our consulates.

Our dependence on the U.S. market – 75 per cent of our trade goes south – was used as leverage by Mr. Trump since only 18 per cent of U.S. exports head north. It is another reminder that we really do need to invest in trade diversification. We have deals with the European Union and with key Pacific partners, most notably Japan. How to realize opportunities opened by these agreements must be another discussion at the first-ministers conference. As with our permanent U.S. campaign, trade diversification must be a Team Canada effort.

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Winners and Losers US MCA

Who are the real winners and losers in the USMCA deal?

Canadian consumer will have more choice, says one researcher

From left to right, U.S. President Donald Trump, Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau. The three countries have reached a new trade deal to be called the the U.S.-Mexico-Canada Agreement, or USMCA for short. (Kevin Lamarque, Daniel Becerril, Chris Wattie/Reuters)

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Canadian consumers are among the biggest winners in the new USMCA deal, according to a researcher who focuses on international trade.

“In terms of dairy, wine, the de minimis threshold — I mean, it was all in the right direction in terms of easier access to goods and services abroad, lower prices and greater variety for the Canadian consumer,” said Christine McDaniel, a senior research fellow at George Mason University.

The de minimis threshold for duty-free shopping — the amount that Canadians can buy in the U.S. and bring back across the border without having to pay a duty — increased from $20 to $150.

The new deal — set to replace NAFTA — has been criticized by the steel and aluminum sectors for not removing U.S. tariffs, but praised by the auto industry for stopping those same tariffs affecting them. The dairy sector is disappointed over concessions made to push the deal through, while the government has been praised for preserving the independent dispute resolution mechanism.

The Current’s Anna Maria Tremonti was joined by trade experts from all three countries to help tally up the wins and losses of the USMCA:

  • Colin Robertson, a former Canadian diplomat who helped negotiate the Canada-U.S. Free Trade Agreement, and later NAFTA. He is now vice-president and fellow at the Canadian Global Affairs Institute.
  • Antonio Ortiz-Mena, an economist who was part of Mexico’s negotiating team when NAFTA was first drafted. He’s now senior vice president at Albright Stonebridge Group, which provides strategic trade advice.
  • Christine McDaniel, senior research fellow at the Mercatus Center at George Mason University. Her research focuses on international trade and economics

    VOICE: I’m looking forward to signing this agreement with Presidents Trump and Pena Nieto. And I really would like to stress this will be good for workers in all three of our countries.

    AMT: There are wins and losses in the new US-Mexico-Canada agreement. Whose wins and whose losses? We’re asking. I’m Anna Maria Tremonti. This is The Current.

    Who are the real winners and losers in the USMCA deal?

    Guests: Christine McDaniel, Colin Roberston, Antonio Ortiz-Mena

    SOUNDCLIP

    VOICE 1: When the Prime Minister offered to renegotiate NAFTA, there were no sunset clauses, steel tariffs or auto quotas. And we already had a dispute resolution mechanism. So these are not new gains in this deal. So we had hoped that the government might negotiate gains for Canada, like an end to the buy America policy that cost billions of dollars and thousands of jobs.

    VOICE 2: Canadians are pleased today that we are moving forward on a historic record that stabilizes, secures and offers certainty to investors to Canadian businesses, but mostly to workers and folks in the middle class.

    AMT: So was it a win for Canada or not so much? You heard Conservative leader Andrew Scheer and Prime Minister Justin Trudeau going back and forth there yesterday in the House of Commons over USMCA, the United States Mexico Canada agreement, is set to replace NAFTA. I’m joined by trade experts from all three countries to help tally up the wins and losses for all involved. Colin Robertson is a former Canadian diplomat who helped negotiate the Canada US Free Trade Agreement and later NAFTA. He is now vice president and fellow at the Canadian Global Affairs Institute. He is in Mexico City. Antonio Ortiz-Mena is an economist who was part of Mexico’s negotiating team when NAFTA was first drafted. He’s been head of economic affairs at the Mexican embassy in the U.S. He’s now senior VP at the Albright Stonebridge Group, which provides strategic trade advice. He’s in Washington, D.C. And for the U.S. Christine McDaniel is a senior research fellow at the Mercatus Center at George Mason University. Her research focuses on international trade and economics. She is also in Washington. Hi everyone.

    CHRISTINE MCDANIEL: Good Morning.

    ANTONIO ORTIZ-MENA: Hello.

    AMT: First of all, USMCA, is anybody calling you US-M-CA or anything like that? Like what are we calling it?

    CM: We’re calling it USMC.

    AMT: For now.

    CM: We’re trying to out how to say it really quickly.

    AMT: OK. I’m going to go around the table quickly and just get a sense of what you see as the most important gain for each country. Antonio Ortiz-Mena, let’s start. Most important gain for Mexico, quickly.

    AOM: Quickly, the fact that there is a new agreement as opposed to just endless uncertainty, in general. Specifically I’m quite obsessed about dispute settlement mechanism. So I’m glad to see that there is a strong dispute settlement mechanism. I think apart from that everything is less important.

    AMT: Colin Robertson. Hello, Colin. Colin Robertson did we lose you? OK while we try to find him, Christine McDaniel very quickly, what do you see as the most important gain for the United States?

    CM: Well I think the biggest gain right now is just the sense of relief you know that we averted disaster. And you know investor confidence hopefully will be built back up you know to the extent it was sort of on the brink there.

    AMT: OK. Colin Robertson what do you see as the biggest win for Canada?

    CR: Well I think I agree with Antonio that dispute settlement mechanism, but importantly the market certainty. You saw the market track yesterday that we now have a deal in the kind of zombie NAFTA zone. That wasn’t good for Canada or Mexico. That having access now once again to the biggest market in the world is important for Canada.

    AMT: Colin Robertson, I want to ask you I’m looking at the CBC opinion page today. Neil Macdonald has a piece where he says that under this deal, if Canada wants a trade deal with China, it must signal its intent ahead of time to the United States. It must submit the text of any deal to the United States and then accept Washington’s verdict on that.

    CR: Well I think what it says is, if Canada has an agreement with a non-market economy and I think you’re going to get some dispute as to because China is a member of the World Trade Organization, but is it a non-market economy. But it’s not a clause I’ve seen before, others have commented on it, Peter Clark as well. We’ll see how what it means in application.

    AMT: And doe that worry you? Given that Canada the real push that came out yesterday from various sectors in Canada was to say Canada needs to diversify so it doesn’t end up on a precipice again.

    CR: No because I think what that there is pressure on China, Canada is part of that steel reduction and things to bring China more fully into how we trade amongst nations and I think the more likely you would see efforts to bring China into what we now call the comprehensive from progressive Trans-Pacific Partnership, which I think is going to become the benchmark for trade agreements in the Pacific. And Canada and Mexico are both members of that and I see that as more likely to be the new benchmark and the encouragement to bring China into that and China will have to take on certain obligations.

    AMT: Let’s talk about some of the losses. Colin Robertson, we heard some negative reaction from dairy farmers on concessions regarding U.S. access to the Canadian dairy market. Canada has says it will compensate dairy farmers. What are we looking at there?

    CR: Well if the United States had joined the Trans-Pacific partnership, we would have given the United States an additional three and a half percent 3.25 percent quota. Instead we’re now giving them I think something like 3.75 percent quota. We’ve given the Europeans about 3 percent quota. So 90 percent of the market is still very much in Canadian hands, so it’s a very small increase. And as you pointed out, the governments, provincial and federal, have offered compensation. We did something similar with the wine industry after the negotiations of the Canada-US free trade agreement and you know it really did turn around our wine industry. Now we sell Canadian wines all over the world. So I think rather than looking at it defensively, we should be looking at it the same way our beef and pork, our grains and our pulse, we we are world gangbusters. I don’t see any reason why our dairy producers and you think of the superb cheeses we produce, strictly out of Quebec, why we can’t turn that around and become real international competition as we are in other parts of the agriculture sector.

    AMT: Christine McDaniel, if Canada is going to compensate the provinces and the federal government, dairy farmers for any losses. Is that how does the United States see that, does that go against free trade?

    CM: Well that’s their prerogative to do. You’ll recall that the United States is doing something similar or are considering doing something similar on agriculture in terms of the effects on US farmers from retaliation from China and others. So you know as long as it’s within the WTO rules and you stay within those parameters then it’s the country’s prerogative to do that.

    AMT: And so what’s the reaction in the United States that this deal has given more access to the Canadian dairy market?

    CM: Well I think it’s positive. It’s definitely in the right direction. I think you know one of the bigger winners here are the Canadian consumers. You know in terms of dairy, wine, the de minimus threshold. I mean it was all in the right direction, you know in terms of you know easier access to goods and services abroad, lower prices and greater variety for the Canadian consumer.

    AMT: Let’s talk about wine for a minute. In BC, the wine industry is going to have changes because the winds have traditionally had exclusivity in grocery stores in the province. Listen to Karen Graham, a wine industry consultant.

    SOUNDCLIP

    VOICE: For the BC wine industry it means a few different things. Some of them certainly today or by November 1, 2019 to be feeling the pinch a little bit in terms of increased competition on BC wine and grocery store shelves.

    AMT: Colin Robertson, there’s unhappiness on that front. What do you think?

    CR: Well this is an example of a kind of what we call non-tariff barriers. No nation is immune from protectionism and essentially what was being practiced in British Columbia was protectionism on behalf of the local vintners. Now again, I say BC makes a very good product. The BC wines are going to have to share shelf space with wines from the US and others. Something we really should have been doing under our NAFTA obligations. And this was sort of rectified in this agreement. I don’t see a problem because I think if you like BC wines, you’re still going to be seeing BC wines, but when you go in and you look at their shelf, you’re now going to have more choice. Yes, some of it is coming from the States, but you’re still going to have the BC wines there. It is up to the consumer to choose, which one he wants to get. And the fact we’re now in accordance with obligations we really undertook under the original North American Free Trade Agreement.

    AMT: I want to ask about the auto industry. Antonio Ortiz-Mena, how will changes in that sector impact Mexico?

    AOM: Well I think that the auto agreements are both a win and a loss for Mexico. I think they’re a loss because Mexico would have preferred to keep the original regional content rule of 62.5 percent regional value added. The fact that it went higher and that it has some wage related requirements means that the rules are pretty complex, they’re cumbersome and some companies might opt to trade under WTO rules, which only provide 42.5 percent tariff. And there’s also a side agreement whereby both Mexico and Canada have a guaranteed quota of 2.6 million autos to be exported from Canada or Mexico to the US, should the US impose new tariffs on autos, under national security laws. So I think that the rules again are very high. They could be cumbersome to implement and we’re looking at a world where this is some sort of an insurance policy. Why do we talk about quotas when we didn’t have quotas 25 years ago? The only way to understand that is we’re entering a new more protectionist world. So this sort of a sthe new agreements insurance policy provision. That’s the way I see it.

    AMT: Christine McDaniel, you’ve said you’ve had mixed feelings on this. How so?

    CM: Well I think you know the North American auto industry has been a relatively competitive on a global scale, but US, Mexico, Canada, automakers in the region, they need access to globally competitive priced inputs. You know I mean if was profit maximizing for them to have you know done some of these things in the past, then they would have been doing that. So you know this is you know putting a restriction on how much you know particular firms in a particular sector must pay their workers, restrictions on where they can get their inputs, at what price and how much. You know these are things that will restrict automakers in the region. You know in a time where you know the real growth is in Asia, so we want a strong competitive globally competitive automotive sector. And these restrictions do not necessarily align with that you know investor confidence.

    AMT: Colin Roberston, I’ll just get you to be brief on the impact for Canada because I want to go to one more topic too.

    CR: No, we’ve moved to similar to what we have in lumber, we’ve moved to manage trade in autos. Keep in mind this is something Donald Trump was insistent on and I make the bigger point is that these negotiations were not initiated by Canada or Mexico. This was very much initiated by the United States. I think the fundamental reason is that Canada and Mexico, 75 percent of our trade is with the United States. Only 18 percent or 17 percent of US trade is with Canada or Mexico. So the US exercised, under Donald Trump, exercised that leverage. I think we’ve come out of this OK. Is it perfect? No, but I think we’re in any trade agreement you take wins and losses and I think overall this is good. And you saw the market reaction, the fact we still have continued access to the biggest market in the world, that’s important for Canada Mexico.

    AMT: Colin Roberston, what about patent protection on certain drug classes being extended another two years. There are concerns that that could really affect provincial pharmacare plans and Canadians buying drugs.

    CR: I think that’s correct, although the cost of that through and the fact that we act as a bit of a cartel when we buy the drug. So yes there’s an additional two years protection for a particular stream of drugs called biologics. But you’re correct, Anna Maria, is the potential for slightly higher costs over a period of time is there, but mitigated in part by the fact that Canadian provinces who are the sort of administer the health care, do act as a cartel to try and get best prices from those they’re buying from.

    AMT: Christine McDaniel, we know the pharma lobby in the United States is one of the biggest lobby is that they had to get this deal. What was going on there?

    CR: Well remember back in our TPP days, they were lobbying very hard for 12 years on data exclusivity protection for biologics. And you know the end of the day, Australia, Canada, Chile, New Zealand, many others, banded together and really blocked that effort by the United States to do that. So the US was not able, it did not look like it was going to be able to do that in TPP. The fact that you know it appears to have sort of twisted Mexico’s arm and then for Canada join in they had it you know reluctantly agree to something that they apparently didn’t want to do earlier. You know that’s I think that’s interesting. Although they didn’t get, US didn’t get the full 12 years, they got 10 years.

    AMT: I’ve got music coming up. Means we’re running out of time. Thank you all of you for weighing in on some of these issues today.

    CM: You bet. Thank you.

    AMT: That’s Colin Robertson, vice president and fellow at Canadian Global Affairs Institute. Antonio Ortiz-Mena, senior vice president of the Albright Stonebridge Group and Christine McDaniel at the Mercatus Center at George Mason University. Stay with us. This is The Current.

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NAFTA Deal? No slam dunk

NAFTA’s future is uncertain, but here’s one plausible scenario

Negotiations might be about to go on hiatus…until 2019, and separate U.S. deals with Canada and Mexico loom as a very possible outcome

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Chrystia Freeland speaks to the media during the seventh round of NAFTA (North American Free Trade Agreement) talks in Mexico City, on March 5, 2018. (RONALDO SCHEMIDT/AFP/Getty Images)

It’s been more than a year since the NAFTA renegotiations foisted on Canada and Mexico by U.S. President Donald Trump started, and so many so-called deadlines have come and gone since then that the word has lost its bite.

But this week, say senior Canadian government officials who spoke on condition they not be named, is different. The reason: When Trump announced his surprise bilateral agreement in principle with Mexico last month, he started a clock ticking that requires him, under the U.S. law known as the Trade Promotion Authority, to deliver the text of that deal by Sept. 30 to the U.S. Congress.

There’s still a slim chance that Prime Minister Justin Trudeau’s bargaining team will come to terms with Trump’s hardball negotiators over the next few days, in time to turn that bilateral U.S.-Mexico deal into a trilateral pact that includes Canada. But that looks increasingly like an extreme long shot.

The top-tier negotiators aren’t even meeting. Foreign Minister Chrystia Freeland, hand-picked by Trudeau to handle NAFTA, is at the United Nations in New York this week, tending to other international files. U.S. Trade Representative Robert Lighthizer, Trump’s powerful lead on NAFTA and other trade files, was also in New York, where he said on Tuesday, “The fact is, Canada is not making concessions in areas where we think they’re essential.”

READ MORE: When it comes to NAFTA, deadlines are meaningless

Predicting what happens next is fiendishly difficult. Several sticking points remain far from being resolved, including Canada’s stiff resistance to U.S. demands that NAFTA’s dispute-settlement mechanism be scrapped. As well, the machinery of domestic U.S. and Mexican electoral politics is bringing complex moving parts into play. A new Mexican president is slated to be sworn in on Dec. 1, while U.S. mid-term congressional elections, which could shake up both the Senate and the House of Representatives, are coming in early November.

Still, stipulating that there are too many political and policy variables to predict anything with much confidence, a Canadian official sketched the following scenario as one that’s emerging as a distinct possibility:

  • Trump delivers to Congress the text of his bilateral deal with Mexico as scheduled on or before Sept. 30, and soon after asks Congress to grant his administration new authority to negotiate a bilateral deal with Canada.
  • Congress takes the allotted 60 days to consider the U.S.-Mexico deal already finalized, and 90 days to study the Trump administration’s plan for bargaining toward a separate U.S.-Canada deal.
  • Assuming Congress accepts the U.S.-Mexico pact, Trump signs that deal with outgoing Mexican President Enrique Pena Nieto by late November, before Pena Nieto is succeeded in December by Andres Manuel Lopez Obrador, the new Mexican president elected in July.
  • In early 2019, the U.S. Congress, likely reshaped by those midterm elections coming up in early November, takes up the work of ratifying the U.S.-Mexico deal. And, at roughly the same time, fresh Canada-U.S. talks pick up where this fall’s frustratingly inconclusive sessions left off.
  • That means ratification of the U.S.-Mexico deal and negotiation of a possible U.S.-Canada pact are happening in tandem, making it possible they could still be combined into a trilateral NAFTA 2.0. Another possibility: parallel bilateral trade deals between the U.S. and its two former NAFTA partners.

There are lot of assumptions built into that sequence, many of which are wide open to debate. Colin Robertson, a former diplomat and vice-president at the Canadian Global Affairs Institute, says the actions of the U.S. Congress are just one serious question mark.

Will Congress accept that bilateral U.S.-Mexico deal, or insist on an agreement that includes Canada? Robertson says Democrats fired up by the battle over Senate confirmation of Trump’s controversial Supreme Court nominee, Brett Kavanaugh, appear to be in no mood to give any Trump proposition—including the bilateral U.S.-Mexico deal—an easy ride. “To assume it’s a slam-dunk in Congress, I just think is wrong,” Robertson said. “That would be my read watching the Democrats over the last weeks.”

Indeed, U.S. politics in the age of Trump are turbulent beyond the experience of any of the Canadian politicians or trade officials embroiled in these prolonged NAFTA renegotiations. Their hesitance to forecast anything is only prudent. But this much is clear: a future in which the nearly 25-year-old NAFTA is split in two is a prospect that Canadian officials are now mapping out seriously. This week’s deadline matters, and might even be looked back on one day as the start of the post-NAFTA era.

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NAFTA Deadlines

September 16, 2018

Foreign Minister Chrystia Freeland is facing pressure to return to Washington this week in a bid to conclude a NAFTA deal under a deadline set by the Americans.

Ms. Freeland will be in Ottawa for the resumption of Parliament Monday, where the Liberal government will be defending the view expressed by her and Prime Minister Justin Trudeau that no deal is better than a bad deal when it comes to the North American free-trade agreement.

Top-level negotiations could resume as early as Tuesday between Ms. Freeland and her American counterpart, U.S. Trade Representative Robert Lighthizer, a federal government source said. But that has yet to be decided.

 Ms. Freeland and Mr. Lighthizer are expected to talk by telephone Monday to discuss whether she should return to Washington on Tuesday for more negotiations, the source said. Mr. Lighthizer signalled to the Canadians that he would be available if warranted on Tuesday, Wednesday and Thursday next week.

Several trade experts said she is likely to make the trip given that she is working under a tight timeline to reach a deal that would prevent the United States and Mexico from moving forward with a bilateral agreement as U.S. President Donald Trump has threatened.

Mexico wants an agreement concluded before incoming president Andres Manuel Lopez Obrador takes office on Dec. 1, and the U.S. administration must give Congress 60 days’ notice for a final text, meaning a Sept. 30 deadline. As well, Mr. Trump is keen to announce a new deal − which he wants renamed as the U.S.-Mexico agreement, or the U.S.-Mexico-Canada accord − prior to the November congressional elections, which are being billed as a referendum on his polarizing tenure in office.

“It’s do or die time for a trilateral deal if the goal is to get it done before Lopez Obrador takes office,” said Maryscott Greenwood, Washington-based chief executive of the Canadian American Business Council.

Ms. Greenwood said Canadian and American negotiators are making slow progress, but added that the United States appears willing to make some compromises. She noted that the U.S. side softened its position in a number of areas to reach an agreement in principle with Mexico late last month.

One veteran trade consultant questioned whether the end-of-month deadline is a real one.

“I think a deal is doable but we don’t have to be rushed,” said Colin Robertson, a former trade negotiator and vice-president of the Canadian Global Affairs Institute. He said there is no reason that Mexico’s incoming president, Mr. Lopez Obrador, could not conclude the deal that was reached with his blessing by his predecessor, Enrique Pena Nieto

“We’ve had these false deadlines before and this seems to me to be the weakest of them all,” he said.

Ottawa could disregard the deadline and take time to pursue a more favourable deal, while counting on Congress to block the administration’s effort to exclude Canada from the trade agreement, Mr. Robertson said. Leading members of Congress and the American business community have said that any new trade deal must include Canada, but Mr. Trump is threatening to impose crippling tariffs on the Canadian auto industry if there is no trade deal.

Key stumbling blocks continue to be U.S. demands that Canada provide significantly greater access to its dairy industry and Ottawa’s insistence on maintaining the Chapter 19 dispute-settlement mechanism that gives parties the right to challenge one another’s application of duties and punitive tariffs. There are several other outstanding issues, including the U.S. desire for greater patent protection for a class of drugs known as biologics; Canada’s demand to have access to U.S. government procurement; and an American push to increase the value of purchases that Canadian shoppers can bring back duty free from the United States.

While Mr. Trump would clearly like to tout his success in renegotiating NAFTA for the mid-term election campaign, he will need Congressional approval to pass it into law. He already faces resistance there, but it will be far tougher for him if the Democrats win control of the House of Representatives as many pollsters and pundits now forecast, said Dan Ujczo, an Ohio-based international trade lawyer who has worked for the Canadian and U.S. governments and closely monitors the NAFTA talks.

Concluding the negotiations “are the least difficult part of what is left to do to complete a new NAFTA,” Mr. Ujczo said. “Getting this through Congress is going to be twice as hard as it was the first time around back in the 1990s, given the politics of trade in the United States right now.”

But Canada cannot count on Congress turning down a new deal and keeping the old one in place, he added. Instead, the Trump administration would likely abrogate the existing deal at the same time it puts the new one before Congress.

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On Peter Boehm

Retiring G7 sherpa explains what every new diplomat should know

By EMILY HAWS      
Meanwhile, Graham Flack and Chantal Maheu have been tapped to fill Louise Levonian and Lori Sterling’s former positions at Employment and Social Development.
Peter Boehm says building mutual trust with political leaders takes time, but it happens by being frank, open, and collaborative. He retires on Sept. 28. The Hill Times photograph by Sam Garcia

Be nimble and learn the local language: these are two pieces of advice Canada’s G7 sherpa Peter Boehm hopes to pass along to new diplomats before he retires from a 37-year career in the foreign service on Sept. 28.

Getting out from behind a desk and experiencing the culture of a posting, including learning the local language, is one of the best ways to develop interpersonal relationships, he said, which is key to diplomacy.

Learning the language “gets you more into the [cultural] aspect,” he said, and counterparts “will appreciate what you’re saying because you’re making the effort to speak their language.”

He spoke the local language when he arrived at his five foreign postings, he said, as he’s spoken German since childhood—having been born in a city with German roots, Kitchener, Ont.—and picked up Spanish in high school, which was refined by three Latin American postings.

“I told our local staff, certainly in Havana at the start, that I would insist that they speak Spanish with me even though their English and French was good. I really wanted to learn Spanish,” he said. “If you immerse yourself and you try hard, then it works.”

Representing a government doesn’t mean you can’t do some outside-of-the-box activities, said Mr. Boehm, adding that it’s okay to take calculated risks and young people should be nimble. He’s always found the cultural and sports side of diplomacy interesting, he said, and so when he was posted as the Canadian ambassador to Germany between 2008 and 2012, he brought over the Canadian women’s soccer team to play against Germany.

“We only lost by one goal, which had Chancellor [Angela] Merkel, who was sitting near me, biting her nails, but it was great,” he said.

The constant change in diplomacy—both in the work and in the country in which one is posted—means the career is never boring, he said. His approachable nature has led those in the foreign affairs community, including former Canadian diplomat Colin Robertson, to call him a “contemporary diplomat” because he combines old-world techniques with new technology, such as social media. Mr. Boehm has a very good grasp of detail and his implementation skills have allowed him to deliver final products effectively, said Mr. Robertson.

Mr. Boehm started his career in 1981 as a foreign service officer, and held various positions with both the foreign and trade ministries (which were separate at the time) until 1997 when he was made the Canadian ambassador to the Organization of American States in Washington.

In 2001, he became the minister of political and public affairs at the Canadian Embassy in Washington, D.C., making him the third in command during the 9/11 terrorist attacks. That day was significant in his career, he said, because his work changed completely but also “it was about the world changing” and becoming more security-minded.

In 2006, he helped evacuate 15,000 Canadians from war-torn Lebanon, and as deputy minister of international development from March 2016 until July 2017, he helped develop the Trudeau government’s Feminist International Assistance Policy.

Of course, Mr. Boehm ended his already impressive career with a bang, heading the planning of the most recent G7 summit in Charlevoix, Que. The drama between United States PresidentDonald Trump and Prime Minister Justin Trudeau (Papineau, Que.) might have grabbed headlines (Mr. Trump called Mr. Trudeau “meek and mild, and “dishonest and weak”) but Mr. Boehm said he’s proud of the substantial commitments agreed upon by member countries.

“On the girls’ education piece … we were hoping to get $1.3-billion together, we achieved $3.8-billion,” he said. “Being there, it was tiring because negotiations…went through several nights, so a few sleepless nights, but that’s kind of normal for the G7.”

His position was elevated to a deputy-minister level by Mr. Trudeau when he was appointed in July 2017. The move was recommended by an auditor general’s report about the 2010 Muskoka summit, said Mr. Boehm. It makes sense when Canada is hosting, as it allows all aspects of the summit to be housed under one roof with one accountability officer.

Since the summit, he’s been winding down to retirement, he said, but even after Sept. 28, he plans to stay engaged on foreign policy issues, as well as mental health policy. Mr. Boehm has long championed the cause, being on Privy Council clerk Michael Wernick’s mental health advisory committee, and it hits close to home, as Mr. Boehm has a son who is autistic.

“A lot more attention is being put on mental health, and destigmatizing it, and certainly in the workplace,” he said, and he wants to stay involved.

Paul Moen, an Earnscliffe Strategy Group principal who worked with Mr. Boehm when he was a Liberal political staffer, said Mr. Boehm has gained influence in Canadian foreign policy because he “listens as much as he talks” and knows when to push and pull at the right moments.

“He’s able to gracefully navigate that boundary between policy and politics, while maintaining his objectivity and serving governments of different political stripes,” he said.

Mr. Boehm did make headlines, however, for perhaps straying a little too far into the political realm when said the previous Conservative government “suppressed” diplomats’ work during its decade in power. He was speaking during a panel discussion in Ottawa hosted by the United Nations Association of Canada earlier this year before the Charlevoix summit.

Of the idea that he’s politically savvy, Mr. Boehm said it’s learned through observing and “willing to be curious” as well as developing a network both within diplomatic and political circles. A strong network comes into play when important decisions need to be made in a tight timeframe, he said, such as during the 2006 Lebanon evacuations.

Mutual trust allows one to give fearless policy advice and implement a government’s decisions loyally, he said, and comes by being frank, open, and collaborative. One also can’t have too thin of skin because the advice might be rejected, he said, but “that’s the beauty of democracy.”

Not getting caught up in bureaucratic processes is also key, he said.

Boehm’s replacement named in DM shuffle

Mr. Trudeau announced David Morrison as Mr. Boehm’s replacement in a press release on Sept. 21. Starting in October, Mr. Morrison will retain his title of associate deputy minister of foreign affairs, but will add G7 sherpa.

Mr. Morrison was appointed the associate deputy minister in October 2017, and was previously the assistant deputy minister for the Americas. He started with the department in 1989 as a foreign service officer, working in Havana, Cuba.

DM Peter Boehm earns colleagues’ respect as mentor, mental health advocate

By Chelsea Nash      
Leading the government’s foreign aid portfolio, the new DM has worked his way up his department over 30 years in the public service.
Peter Boehm, a longtime foreign service officer recently made deputy minister of international development, in front of a Neil Young poster hanging in his office at Global Affairs last week. The Hill Times photograph by Chelsea Nash

When I emailed Peter Boehm, the new deputy minister for international development, for an interview, he responded almost immediately. He’d be happy to speak with me, either over the phone or to meet me in person at his office. It was a pleasant surprise: high-level government officials such as Mr. Boehm are rarely so accessible and generous with their valuable time.

As Janice Stein, a friend of Mr. Boehm’s and founding director of the Munk School of Global Affairs at the University of Toronto said, “When people become deputy minister, every five minutes counts.” She herself has not spoken to him since he assumed his new role, as acting deputy minister in November, and as confirmed deputy minister in March.

But open and approachable are exactly the words former colleagues and friends use to describe the career diplomat. He’s the “quintessential diplomat,” says former Canadian diplomat Colin Robertson, and “uniformly highly regarded,” says Tim Hodges, former head of the Canadian diplomats union Professional Association of Foreign Service Officers, and a friend and colleague to Mr. Boehm.

He has a large presence. A tall man, he stands out in any crowd, but he also has the sometimes-intimidating aura of someone whose approval needs to be earned. “Professional, curious, well-read, well-travelled, and deliberative in his judgments,” is how Mr. Robertson described him in an email.

He has a dry sense of humour, and is quite soft-spoken, though he doesn’t hold back while answering questions.

Mr. Hodges, who worked directly under Mr. Boehm at Canada’s embassy in Washington, D.C., and regards him as a mentor, said as much. Mr. Boehm was minister in charge of political and public affairs there from 2001 to 2004.

“He’s a tough brief, in the sense that he will read what you send him, and he will digest it, and you had better be up to speed when you get back to have a discussion about what you’ve written,” he said. A demanding boss, but in a good way, said Mr. Hodges, because he doesn’t simply ask for the best, but demonstrates it. Above all else, he is a leader, he said.

“He’s been my mentor, whether he knew it or not, for many years. I think he’s been a mentor for many other people…He not only cares about people, but he cares about people moving up through the system. That is usually voluntary; it’s not required for the job. It usually is after-hours, or find time at lunch time to have a sandwich with someone and talk about a problem,” he said, speaking of the extra effort that Mr. Boehm has given the department over the years.

The DM has been with the department since he first joined as a foreign service officer more than 30 years ago. He is the only deputy minister in the department to bring first-hand experience within the foreign service—18 years worth, in fact—to the position.

Born in Kitchener, Ont., he grew up speaking German and English, and received a bachelor of arts in English and history from Wilfrid Laurier University in the region in 1977, according to biographies of him by his alma mater and his department.

His time at Carleton University’s Norman Paterson School of International Affairs, where he earned his master of arts in 1978, first sparked his interest in the foreign service. He applied then, but never heard back. So instead, he went to the University of Edinburgh on a scholarship, where he completed his PhD in history. At the time, teaching seemed to be the natural course of action for him, however, he wasn’t having much luck with his applications. He decided to try the foreign service again. This time, he heard back.

Next thing he knew, he was on his first posting in Havana, Cuba. He hopped after that to places including Germany as ambassador  from 2008 to 2012, and San José, Costa Rica. He’s also been ambassador and permanent representative to the Organization of American States from 1997 to 2001, and from 2005 to 2008, he was the senior official responsible for the North American leaders’ summits. Along the way, he’s earned the Public Service of Canada Outstanding Achievement Award and the Canadian Foreign Service Officer Award for his help toward achieving peace in Central America.

“It’s fair to say he’s a very results-oriented person, and he wants to deliver. He’s focused always on: what’s this going to deliver? How are we going to execute this? I think that’s a very good combination, to be open at the front end and focused at the back end,” said Ms. Stein.

Aid program review wrapping up

Interestingly enough, “open at the front end and focused at the back end” seems to mirror the format of the international development review the department is in the process of wrapping up. Public submissions on the future of Canada’s foreign aid program stopped being accepted at the end of July, and Mr. Boehm said they are in a period of “internal assessment, and trying to see what are the policy thrusts we are going to suggest to the minister.”

It was the first review of its kind the department has done, he said. Both in terms of the technology used to conduct the review—the department had a portal on its website to accept input—as well as the format of the review itself: the department accepted thousands of submissions from “really anyone in the world.”

Mr. Boehm said “a number of trends are already emerging,” including a focus on women and girls, and their rights and empowerment. Education and climate change are also important themes, he said.

“It’s a very exciting moment because there’s never been a consultation that has been undertaken in this way in our history,” he said, “in terms of really trying to get the most input from as many actors as we can, and trying to come out with a policy that is very 21st century, that is very forward-leaning, and can serve as an example for other countries.”

He said in his capacity as G7 sherpa—representative of the prime minister to the G7 summit—he has also been consulting with his counterparts from other countries for the development review, and talking to them about their challenges and successes.

“There is an exponential need for humanitarian assistance. The needs are high, but we also have traditional development. There’s a squeeze there in terms of how we use the budget, the dollars, to greatest effect. That also suggests looking at new and creative ways of programming and addressing these challenges,” he said.

Mental health advocate

Mr. Boehm also has a reputation for advocating for mental health initiatives, and has made great strides within the department to provide a support structure for foreign service officers.

Ms. Stein said mental health “was an important issue for him long before it became an important issue for many people…He does it in a very quiet, but very persistent, way—which again, reflects who he is.”

Mr. Boehm attributes his determination to advance mental health initiatives and to reduce stigma to his own experience. One of Mr. Boehm’s sons, who was born abroad, is autistic.

“Just travelling with him, and making sure he gets the supports he needs was probably the greatest challenge of my life,” he said. “I’ve been pushing it and I’ve blogged about it internally in terms of my own experience. And if I can talk about it, and write about it, then why can’t others?”

He is the father of three other children as well, ranging in age from 12 to 33. They are all over the globe, from Vancouver to Budapest, doing “different things.” None want to follow directly in his footsteps, he said, though they all seem to have caught his interest in international affairs.

“My 12-year-old, I have a plan for her,” he said with a coy smile. “Prime minister.”

The 62-year-old was reluctant to admit his age, saying he doesn’t think like he’s 62. That’s what his 12-year-old daughter tells him, anyways. And, having only been in his current position since November 2015, Mr. Boehm said retirement is not on his horizon anytime soon.

“Oh I’m not gone yet,” he said. “I’d like to stay involved in international issues. I think I have contributions to make.”

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The Final Round NAFTA?

A little more than a year after negotiations began on a revised North American free-trade agreement, a deal looks possible, although big questions remain.

For much of the past two months, Mexican and American negotiators have wrestled with the U.S. demand around the content rules for our most-traded commodity, the automobile. North Americans produce 17.5 million cars or trucks annually. The original U.S. demand of 85 per cent North American content with 50 per cent of that “Made in the USA” has apparently morphed into 75 per cent North American content with 40 per cent to 45 per cent made by workers making US$16 or more a hour.

The devil is always in the details, but Canadian industry and its workers can live with this and, if this gives U.S. President Donald Trump his “win,” then we are on our way to a deal.

So, too, with the “sunset” clause. Originally, the United States wanted the new agreement to lapse after five years – something investors said would freeze investment, especially into Canada and Mexico. U.S. Trade Representative Robert Lighthizer reportedly says it will now be 16 years with a review after six years. We can live with that.

On dispute settlement, or Chapter 19, the picture is murky and we will need clarification. The Trump team originally wanted to jettison the binational mechanism, and it appears there will be investor-state provisions, something U.S. industry lobbied hard to retain, and some form of recourse, beyond the U.S. system, for energy and infrastructure. Canada and Mexico need to stand firm. We need recourse from U.S. trade-remedy legislation – countervail, anti-dump and, as the Trump administration misapplies it, national security.

If reports are accurate, there appears to be near-agreement on agriculture (good for Canadian farmers) and on intellectual property (unchanged) but again, the devil will be in the details.

The negotiators were originally aiming for 30-plus chapters of NAFTA but until now only nine had been closed and, of course, nothing is truly closed until it is all done.

So what remains and how might they be resolved? From Canada’s perspective, assuming we can work out dispute settlement, we need to see action on three more items.

  • Government procurement: Canada wants to retain open access, but the United States is offering a derisory dollar-for-dollar deal. If we cannot work this out, we should leave it to governors and premiers to work out the kind of reciprocal procurement deal that they achieved in 2010. This could be regional or national; the incentive for both sides is that an outside bidder curbs local price-fixing. This will be important especially if Mr. Trump proceeds with his trillion-dollar “Big Build” infrastructure initiative.
  • Labour mobility: We want to update for the digital age the ease of passage for designated occupations. Businesses, especially those with North American supply chains, need this to maintain competitiveness. In the current U.S. environment, this is probably a stretch. We would do well if we can maintain the current list and punt this over to a separate negotiation.
  • Dairy access: Mr. Trump continues to single this out. It is time to reform supply management just as we did with our wine industry through the original Canada-U.S. free-trade agreement in 1987 and then our managed trade in grain. Provide adjustment assistance but open up our dairy and poultry industries, which make good products and, like our beef and pork sectors, and now our grains and pulse production, they can be world-beaters.

While Mr. Trump thinks negotiations can wrap up this week, we will likely see fall leaves and probably snow before the deal is done. Legislative ratification, especially in the United States, is an even bigger question mark. It will likely be the next Congress, chosen in November and taking office in January, that will give “up or down” approval to the new accord. It won’t be easy.

The coming days – more likely weeks – will be a test of Canadian negotiators. They are a very experienced team and they are up to the task as long as the government has their backs.

This is the bigger question: Can the Trudeau government take the political flak that will inevitably come its way? It won’t be sunny ways. If it can stick it out, the Trudeau government will make as big a contribution to Canadian well being and competitiveness as Brian Mulroney and his Progressive Conservative government did with the original Canada-U.S. FTA and then the NAFTA. It would be no small legacy.

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NAFTA and Trump

 Sentiment Factoring Into NAFTA Negotiations
Colin Robertson – Canadian Global Affairs Institute
Farmscape for August 13, 2018

The Vice-President of the Canadian Global Affairs Institute suggests a growing protectionist sentiment within the United States is factoring into the NAFA negotiations.
Negotiations aimed at modernizing the North American Free Trade Agreement are essentially on hold until next year awaiting results of the U.S, mid-term elections.
Colin Robertson, the Vice-President and a fellow of the Canadian Global Affairs Institute, says the U.S. public and now a large number of elected representatives in Congress and at the state level, recognize the value of NAFTA but the tide of protectionism is increasing.

Clip-Colin Robertson-Canadian Global Affairs Institute:
Polling, and I rely particularly on Pew, P E W, I think they’re the gold standard for polling in the United States, their most recent poll, which I think was March or April, suggested that a majority of Americans, around 55 to 60 percent see value in free trade agreements.
They think the United States has actually got something out of it.
They see particular value in a Canada-U.S. free trade agreement because they think we’re fair traders.
However the same polling shows that the base of the Republican party is becoming increasingly protectionist, more protectionist indeed than their representatives and it is that base that Donald Trump relies upon.
A good 40 percent to 50 percent of his base is really anti-trade.
When he speaks on trade he’s playing to that base and that is a factor we have to take into account because that’s the group he’s going to rely upon if he wants to seek reelection in 2020.

Robertson  suggests pressure from the farm community, which voted mostly for President Trump, and the manufacturing sector, many of whom voted for President Trump, is probably what has kept him from rescinding the NAFTA but it has not influenced the administration to bend on some of its more unreasonable positions.
For Farmscape.Ca, I’m Bruce Cochrane.

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